Convergence or Divergence in Development

Submitted by Homi Kharas
On Thu, 09/19/2013

[1] The narrative on development economics—the discipline that deals with well-being in the low and middle income countries where 6 billion people on our planet live—continues to swing back and forth between optimism and pessimism. The United Nations’ High-Level Panel report on the post-2015 development agenda[2] (for which I was the Lead Author) calls for the eradication of extreme poverty by 2030, a boldly optimistic goal. But it also emphasizes that this can only be achieved if we learn from our past mistakes; business-as-usual will not get us there because, despite massive and broad-based progress, too many people are being left behind and too many programs are failing to reach scale, points that pessimists focus on.

Finding the right balance between optimism and pessimism is important in setting global goals that are bold and ambitious yet achievable, something we should all be focused on as the conversation heats up on what should replace the Millennium Development Goals. It requires a deep and broad understanding of what is actually happening, of challenges and prospects for poverty reduction and broad-based development. This is why a blog reflecting multiple voices talking about actual experiences, especially voices from developing countries themselves, is so important. If we listen to enough thoughtful people, maybe we can move beyond the theologies of the Washington, Beijing or other development consensus ideas, none of which seem to fit the diverse range of developing countries and our rapidly changing times.

We have to be honest that there is no consensus on development prospects, and there’s much we still don’t know and understand. Sixteen years ago, Lant Pritchett published a highly influential paper, “Divergence, Big Time[3]” in which he argued that backwardness appeared to carry severe disadvantages that generated long-term divergence between the growth in per capita incomes of developing countries compared to rich countries. More recently, Arvind Subramanian has argued exactly the opposite--that since the late 1990s the number of developing countries experiencing catch-up has more than trebled (from 21 to 75 countries) and the rate of average catch-up has doubled from 1.5 percent per year to over 3 percent. He attributes this to “The hyperglobalization of Trade and its Future[4]”. Nobel-prize winner, A. Michael Spence has recently published a book called The Next Convergence[5] that also suggests that rapid, sustained long-run growth is now possible across the developing world. Others, like Kemal Dervis, have discussed parallel phenomena of convergence between countries and divergence within them[6].

There is already a vigorous debate as to whether the decade-long period that Subramanian and Spence look at is a trend ofthe new millennium or merely an upswing in a long-term cycle that will soon turn down, which Pritchett would argue is more consistent with the historical record. There are limits to the general divergence/convergence debate—too much depends on what individual countries do, their histories and sometimes, plain luck—but I do think it is useful to have an exchange of views as to the role played by domestic policies and institutional changes and global economic conditions and institutions. And to have this exchange of views in a contextualized way across a number of countries so that anecdotes can add up to a persuasive body of evidence.